Entries Posted in Ideas Worth Exploring

Earn more or spend less. Those are the two basic ways to achieve financial fitness, whether you’re talking about the household budget or a multi-billion-dollar corporate balance sheet.

And that’s what it comes down to for the U.S. Postal Service as it seeks to bring revenue in line with expenses (it lost $5 billion in fiscal year (FY) 2013). So far, the Postal Service has been looking at cost cutting ideas like moving to 5-day mail delivery to changing employee benefits to consolidating networks.

It’s also been trying to grow revenue, most notably in the package delivery business. But are there some unexplored opportunities to generate income, particularly by taking advantage of one of the Postal Service’s greatest assets – its last mile delivery network?

We asked that question in a previous blog entry and explored it in more detail in a recent audit report, Delivery Operations – Additional Carrier Services. We came up with nearly two dozen ideas – everything from monitoring services for the elderly and collection of air quality details on delivery vehicles to traffic reporting services and dry cleaning delivery. While these ideas should be explored, most would involve significant financial investments, additional training, and changes to core hours or labor agreements. Also, the 2006 postal law prohibits the Postal Service from offering any new services that aren’t postal in nature.

But the Postal Service could move relatively quickly to add one new, albeit modest, moneymaker: advertising on postal vehicles. The agency has dipped its toe into similar waters by co-branding with Sony Pictures to promote Priority Mail and “The Amazing Spider Man-2” on mail trucks. But it could also sell space on its vehicles to promote products unrelated to mail.

On the other hand, even with all those delivery vans, the Postal Service estimates revenue opportunities would be limited to only about $30 million in FY 2015. That’s because advertising would likely be profitable only in densely populated areas and the Postal Service would carefully select advertisers that don’t compromise its trusted brand.

Should the Postal Service look at every opportunity to raise revenue by leveraging its last mile delivery force or should carriers stick to delivering the mail? What about advertising? Would the postal brand be tarnished if delivery vehicles promoted nonpostal products or is this a worthwhile opportunity to raise much-needed revenue?

Dim weight. Sounds like something you might call your not-so-smart cousin. It’s actually a way to price parcels based primarily on how much space they take up during transport and delivery.

FedEx is the first major carrier to announce plans to charge prices based on the dimensional weight of all its ground shipments. Retailers and other shippers are bracing for a nasty hike in shipping costs come January 2015, when the FedEx changes take effect.

Shipping costs are heavily influenced by how much cubic volume a parcel takes up in the back of a truck or plane. If parcels are roughly uniform in density (weight in relation to size), then charging by weight makes sense. But if parcels are light yet bulky, such as shoes, diapers, and many other goods ordered online, then weight-based pricing doesn’t reflect costs. Dim weight pricing will let FedEx charge more for these light yet bulky packages – for example up to 30 percent higher on a 32-pack of toilet paper – that take up more space in the truck.

Analysts say FedEx’s change will result in the most dramatic rate spike the parcel shipping industry has seen in decades. And these increases will affect either online shoppers or retailers, or both. As the Wall Street Journal recently noted: “Someone will have to swallow the estimated hundreds of millions of dollars in extra shipping costs.” Could free shipping for consumers become a casualty of this pricing change?

Analysts expect UPS to follow suit with a similar pricing strategy. If so, the Postal Service and small regional carriers could see an uptick in volume – albeit higher-cost and lower-yield volume – as shippers look for ways to reduce the expected sticker shock from dim weight pricing. The move also could accelerate Amazon’s reported plan to launch its own fleet of trucks and drivers for local deliveries.

Do you think FedEx’s change in its pricing structure will benefit the Postal Service? Or is it likely to primarily shift less-profitable packages to the Postal Service? Should the Postal Service consider a move to dim weight pricing for its ground services as well? Or would it hurt the Postal Service’s standing as the lowest-priced competitor?

If you are even remotely digitally hip, you probably know that “big data” is a hot topic. But it is far from a mere fad. Big data — which refers to large, complex datasets combined with sophisticated, powerful analytics — has definitely been having a big impact on not just scientific research capabilities, but commercial activity as well. Amazon, Walmart, and eBay are just a few businesses using big data to better target products and services to consumers.

Could big data help the postal industry? Earlier this year we jointly hosted a forum with the Universal Postal Union to discuss that and many related questions. Postal experts and big data experts from all over the world attended, and they agreed that, yes, big data can provide extraordinary opportunities for postal operators — including the U.S. Postal Service — to improve operations as well as current products and services, and even create new ones.

It’s not a quick and easy process, though. The forum established that a clear and coherent big data strategy must first be articulated – one that answers questions like, “What will you use the data for?” and “How will you ensure privacy?” Some of the first steps in this strategy include buy-in from top leaders of the organization in addition to development of partnerships with other stakeholders to share data sources. Also, internal changes must be made, such as taking an interdisciplinary approach involving data experts and marketing whizzes to build a digital culture within the organization.

All of this happens one step at a time, and our new paper, International Postal Big Data: Discussion Forum Recap, details each one of these steps. It also includes information on big data pilot-trials that some postal operators have launched and the particular operations and services their big data experiments have involved.

What do you think? How does your company use big data? How do you see the Postal Service using big data? What concerns would you have about the Postal Service using data analytics to develop new products or services? Where do you see opportunities for the Postal Service to partner with the private sector?

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Dear USPS,
I had an opportunity to try your automated postal service Kiosk for the first time.
I am an engineer / scientist and so these type of systems interest me.
I thought I would pass along my experience, in the event you...

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